IEA Sees Tighter Oil Market, Boosts Global Demand F’cast

Jan. 18 (Bloomberg) -- The International Energy Agency
raised forecasts for global oil demand this year because of
stronger growth expectations for China and said the world oil
market is “tighter” than previously estimated.

“All of a sudden, the market looks tighter than we
thought,” the Paris-based agency said, boosting its 2013 global
demand forecast by 240,000 barrels a day. World consumption will
increase by 900,000 barrels a day, or 1 percent, this year to
average a record 90.8 million. Saudi Arabia, the world’s largest
exporter, reduced production from its highest in 30 years, and
inventories in developed economies are contracting after
accumulating in much of 2012, according to the IEA.

“China has been doing quite a bit of growth-supportive
policy,” Amrita Sen, chief oil market strategist at research
consultant Energy Aspects Ltd. in London, who predicts the IEA
may further increase its demand forecast for the Asian country.
“Clearly there’s an underlying momentum” in the nation’s
consumption, she said.

Brent crude futures traded at $111 a barrel on the London-based ICE Futures Europe exchange today, after advancing 3.5
percent last year. Economic growth in China, the world’s biggest
energy user, accelerated in the fourth quarter for the first
time in two years amid government measures to revive demand.

China will use 390,000 barrels a day, or 4 percent, more
oil this year than in 2012, to reach 10 million a day, according
to the adviser to energy-consuming nations. That’s 135,000 more
than previously predicted. The nation’s gross domestic product
expanded by 7.9 percent in the fourth quarter from a year
earlier, the National Bureau of Statistics said today.

Bullish Readings

“Recent bullish readings have signaled the potential for a
rebound” in China’s economy, the IEA said in its monthly oil
market report. Global oil demand growth remains “relatively
restrained,” the agency said.

The Organization of Petroleum Exporting Countries cut
production to the lowest level in a year in December, curbing
supplies by 265,000 barrels a day to 30.65 million, the IEA
estimated. Saudi Arabia, the group’s biggest member, curtailed
output by almost 290,000 barrels a day to 9.4 million because of
a decline in domestic consumption.

Even after the drop, OPEC is producing about 650,000
barrels a day more than the average of 30 million it will need
to provide in 2013, the IEA said. OPEC’s 12 members pumped an
average of 31.4 million barrels last year, the highest annual
level in its history.

Non-OPEC Supply

Producers outside of OPEC such as the U.S., Canada and
Brazil will increase supplies this year by the most since 2010,
the IEA said. Non-OPEC producers will boost output by 980,000
barrels a day to 54.3 million a day, an increase of 150,000
barrels from last month’s projection.

Oil inventories in the world’s most industrialized nations
fell by 18.7 million barrels in November, declining about three
times more than normal for the time of year, the agency said.
Stockpiles were at 2.7 billion barrels, narrowing their surplus
to the five-year average to 4 million barrels. Refined product
levels were equivalent to 30 days of consumption, the IEA said.

Several European refineries have reduced production
counter-seasonally because of a fall in processing margins and
more will probably cut operations if profits don’t recover, the
agency said.

“Weak demand, in part due to a mild winter and the
progressive return from maintenance of European and Russian
refineries, has driven down European refining margins by $3 a
barrel in northwest Europe and $2 a barrel in the
Mediterranean,” the IEA said.